New Regulation by RBI for Cross-Border Payment Aggregators

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New Regulation by RBI for Cross-Border Payment Aggregators

Garima Prakash

@GarimaP

November 8, 2023

Public Policy

246

October 31, 2023, the Reserve Bank of India (RBI) issued Regulations for Payment Aggregator – Cross Border on (PA-CB Regulations). This is with the aim of regulating entities seeking to facilitate cross-border payments for import and export of goods and services.

Earlier, Online Payment Gateway Service Providers (OPGSPs) were allowed to facilitate cross-border transactions for import of goods and software and export of goods and services through arrangements with banks, subject to monetary and other restrictions. Thereafter, in April 2022, the RBI had issued a draft circular on processing and settlement of small value Export and Import related payments facilitated by Online Export-Import Facilitators (OEIFs) which were intended to replace the OPGSP regulations. Although, this circular has not been implemented as of now. Nasscom’s feedback on the OEIF framework has been addressed by the RBI under the PA-CB Regulations, as follows:

· Inclusion of export of service under the cross-border payment facilitation framework.

· Requiring the cross-border payment facilitator to undertake KYC of overseas importer.

Salient features of the PA-CB Regulations

1. Authorisation:

· Entities currently facilitating cross-border payments for import/export must apply for authorisation by April 30, 2024, by:

o Registering with Financial Intelligence Unit-India (FIU-IND).

o Ensuring adherence on certain aspects of the RBI Guidelines on Regulation of Payment Aggregators and Payment Gateways dated March 17, 202011 (PA/PG Guidelines) within 3 months, i.e., January 31, 2024.

· Current Payment Aggregators (PAs) should inform the RBI within 60 days whether they have existing PA-CB operations and whether they would continue with it. If yes, PAs would need to seek approval of the RBI.

· In future, any authorised PA which wants to commence PA-CB activity will need to seek approval from RBI prior to commencement of such business.

2. Net worth requirement: These are similar to the capital requirements under PA-PG Guidelines

· Non-banks providing PA-CB services should have a minimum networth of ₹15 crore at the time of submitting application to the RBI for authorisation and a minimum networth of ₹25 crore by March 31, 2026.

· New non-bank PA-CBs (i.e. entities which have not commenced operations before October 31, 2023), should have a minimum networth of ₹15 crore at the time of submitting application to the RBI for authorisation and shall attain a minimum networth of ₹25 crore by end of the third financial year of grant of authorisation.

3. Imports:

· Payments towards imports must be made to the PA-CB’s domestic escrow account, transferred to an Import Collection Account (ICA) held with an AD category-1 scheduled commercial bank and ultimately sent to the foreign merchant.

· PA-CBs are responsible for undertaking customer due diligence as per the KYC Master Direction of any offshore e-commerce marketplace, offshore PAs or offshore merchants directly onboarded.

4. Exports:

· Payments towards exports must be made to an Export Collection Account (ECA) created separately for each currency with an AD category-1 scheduled commercial bank, and then settled to the account of the merchant in India.

· PA-CBs are responsible for undertaking customer due diligence as per the KYC Master Direction of its Indian merchants who are directly onboarded, domestic e-commerce marketplaces or entities providing domestic PA services.

5. Other Conditions:

· PA-CBs facilitating import or export transactions or both should ensure that they do not facilitate payments for restricted/prohibited goods and services, i.e., those not permissible under India’s Foreign Trade Policy.

· PA-CBs facilitating import and export transactions should maintain separate collection accounts for such imports and exports and maintain a separate escrow account for domestic PA activity (if applicable).

· For import and export transactions processed by PA-CBs, the maximum value per unit of goods/services sold/purchased shall be ₹25,00,000.

We are evaluating the impact of these regulations and encourage the industry to write to garima@nasscom.in with a copy to policy@nasscom.in to share their feedback.

RBI Fintech import export cross-border payments

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Garima Prakash

Manager, Public Policy and Government Affairs

Reach out to me for all things policy about e-commerce, international trade, export controls, start-ups and fintech